Dr. Lennart Sandholm
Professor and President, Sandholm Associates AB, Djursholm, Sweden
Strategic Responses for Customer Satisfaction
Paper to the Sarawak's 3rd International Quality Congress, Kuching, Malaysia, September 2004
Sound profitability is of crucial importance for any company that will survive and develop successfully. This fact is well known to any top executive. In the efforts to achieve better profitability, management normally employs a variety of different means. One is to influence the income side by selling more. Another is to lower costs by rationalizing the activities. A third approach is to reduce the amount of capital invested by implementing programs for capital rationalization.
An approach that is often ignored is to improve profitability by improving quality. More effective and more dedicated handling of issues that have an impact on quality will enable the company to influence revenue and costs in ways that will benefit profitability greatly. Growing numbers of companies are learning this to their benefit.
Profit, quality and customer satisfaction interaction
Improved quality will lead to increased income, reduced costs, better customer satisfaction and with that better customer loyalty. How this influences profit is described in Figure 1.
Figure 1. How improved quality increases the profit.
Have quality initiatives usually led to essentially better quality?
There is a considerable and growing interest in quality. There are several reasons for this: customers' increasingly demanding quality requirements, tougher competition in the market place, demands for improved profitability, growing complexity of goods and services, product liability legislation. This is evident not only in the manufacturing sector but also in the services sector. The importance of quality is growing constantly in both the private sector and the public sector.
Has this growing interest in quality resulted in the production of goods and services of better quality? Do companies now work on these questions more effectively than they used to? Unfortunately, it is not possible to answer this question with an unconditional yes because in many cases, only marginal results have been achieved when measured in increased profit, better customer satisfaction and other relevant measures.
Many companies concern themselves solely with whatever is in fashion at the time. The list of phenomena of this kind is long - quality circles, SPC, QFD, seven QC tools, ISO 9000, benchmarking, process reengineering, and so on. There is nothing wrong with these approaches as such. The problem is how they are used. They are applied as general, isolated methods for influencing quality, for the limited period while they are in fashion. Very few analyses are ever made of what is really needed. A methods-oriented approach takes precedence over a results-oriented approach. In consequence, many companies have not made much progress along the path to excellence. The underlying causes of this situation are often immaturity and ignorance among top executives.
J. M. Juran (Debbie Phillips-Donaldson, On Leadership, Quality Progress, Vol. 35, No. 8 (August 2002), pp. 24, 25.) gives several reasons why not better results have been achieved:
- Executives are skeptical; many companies have tried to "do" quality and failed.
- They have learned not to trust quality advocates - internal and external.
- Executives believe, "Our business is different."
- Many executives believe becoming certified to ISO 9000 will solve all quality problems.
- The varying quality terms and programs create confusion and a belief that higher quality costs more.
- Many executives believe that they can lead their organizations to quality leadership without becoming personally and deeply involved.
"Our business is different"
Of course, every business is different, maybe unique. Operations vary significantly. Some businesses produce goods, others supply services. Goods and services vary greatly. Businesses often work in different ways. Background, ownership, work organisation, etc. vary from business to business.
There are, however, many similarities.
Similarity 1: Every business has a task
Every business has been set up to serve others. Depending on the nature of the business, these are called customers, buyers, users, patients, citizens, etc.
Every business aims to give something to those it has been set up to serve. For some businesses this means the supply of goods, for others this means the supply of services. In both cases, the 'something' is a product.
Similarity 2: The conditions are similar
An important feature of every organization is that it contains people who are engaged in work. Depending on the size and direction of the organization, these people are located in smaller or larger organizational units (departments, sections, groups, administrations, clinics etc.).
In every organization the people in the various organizational units carry out different types of tasks. These tasks contain different activities. What these activities have in common, however, is that they must result in something (i.e. goods or services) for those the business was set up to serve.
Similarity 3: The conditions have consequences
In businesses where people are divided into different organizational units, there are often deficiencies in the co-ordination of the activities the people are engaged in. What needs to be done and by whom is unclear. The division of responsibility can be vague. Maybe the responsibility can be clarified, but what about the authority linked to the responsibility?
Similarity 4: There is potential for improvement in every business
As a result of the conditions described above there are opportunities for considerable improvement in every business. This potential for improvement can be found in two areas irrespective of the type of business.
The first area is what the business results in, i.e. the goods and services the business supplies to those it has been set up for. The goods and services can be developed to satisfy additional needs and expectations, which means giving more to the customers. In addition, there are often deficiencies and faults that can be eliminated.
The other area is the way the business is run. All businesses are made up of processes. These are made up of activities linked together in different ways. The processes will result in goods and services. Some of these are ultimately intended for those the business was set up to serve, some are intended for those who support the internal operations. In both cases, there are opportunities for improved efficiency, shorter lead-times and reduction of deficiencies and faults.
Similarity 5: Leadership is necessary to realise the potential for improvement
In many businesses the large potential for improvement is not exploited. The reason is that the business lacks a professional, committed, consistent and clear leadership when it comes to quality. Top management may often talk of quality but this is not reflected in action. The deficiencies in the leadership for quality are clear.
Learn from the successful companies
There are companies that are successful. These companies show a distinct result orientation and a good level of competence in the quality area. By carefully studying successful companies, the basis for an effective program for business development can be formed. The outstanding features of companies that have succeeded in their quality initiatives are given below.
- Work focused on customers
Activities are focused on satisfying the customers' needs - both external and internal customers.
- Competition watched closely
To be better than the competitors in the eyes of the external customers is an effective strategy for success.
- Measures based on facts
If measures taken are based on facts there is more chance of achieving better results. Opinions, beliefs and vague ideas are best avoided as a basis for making decisions.
- Work focused on results
In business, it is the results that count. Are our customers much more satisfied? Have we halved the cost of poor quality? The activities should focus on goals of this type. Blinkered focusing on methods that happen to be fashionable at the time is best avoided. These should be recognized for what they are - methods suitable to be used when an analysis indicates that use of such a method can lead to considerably better results.
- Chronic problems tackled systematically
Chronic problems, often hidden in the organization, count for great losses. Eliminating their root causes in a systematical and organized way leads to a great gain in profitability.
- Preventive measures taken
Launching of new products or services is done with a clear focus on meeting the customers' needs and wishes all from the beginning.
- Work characterized by action
It is action that gets results. Just talking will not get very far.
- Persistent and systematic work towards agreed goals
To achieve really worthwhile results persistent and systematic work is required. Consistent and regular action is necessary. "Quick fixes" that do not involve much effort will not get the company very far.
- Long-term view
Giving the business a long-term orientation is the only road to success. Short campaigns will not produce any lasting results.
- Hands-on leadership
The company's top executive provides a hands-on leadership characterized by commitment and visibility.
- Everyone involved
Excellent business results require the dedication and participation of everyone. Conditions for performing the work in a good way are provided by management.
- Everyone trained
To become a real quality organization means for many companies a transformation of the internal culture. Everyone's attitudes have to be changed; new skills are required in many areas. This is achieved by means of a massive training program aiming at all functions and all levels of the organization.
- Partnership with customers and suppliers
The company has an open and constructive co-operation with key customers and suppliers, to the benefit of both parties.
Effective strategies for business success
A company that wishes to become the market leader or to significantly improve its profitability as a result of a genuine focus on quality will need some kind of strategy. However, companies that choose their strategies solely on the basis of the latest fashion in methods will fail to reach their challenging goals.
What are needed are effective strategies. Essentially, there are four strategies that are relevant to companies wishing to achieve outstanding results. If quantum leaps are to be achieved in the quality field, measures based on all four strategies will be required.
Strategy 1: Hands-on leadership
Leadership starts with the company's top executive. He or she is the company's quality leader par excellence, and as such should provide hands-on leadership in the quality field.
Leadership of this type includes various measures that are initiated by the top executive:
Mission and vision
Leadership is founded on two statements: mission and vision. The mission makes clear why the company exists, the vision tells what the company likes to accomplish or where it would like to be sometime in the future. A good vision is customer focused, doable, compelling and shared throughout the organization.
Quality policy
A quality policy based on the company's vision is drawn up, introduced and made known to everyone in the organization. The quality policy includes guiding principles for the work. It applies to all activities that influence quality. The quality policy should be long-term, comprehensive, relevant and kept short. It has to come by conviction from the top executive.
Quality goals
Overall quality goals are drawn up for the entire organization and then broken down into sub-goals for each function and process. The goals should be stretch goals for improvements. They should be quantitative and written. Plans for achieving the goals are drawn up, implemented and followed up.
Quality system
The quality system based on the quality policy embraces quality related activities. It shows what relationships these activities have to each other. The quality system thus forms a network of procedures that should be followed in activities, which influence the quality of goods and services. The scope will depend on the size of the organization. The international ISO 9000 standards on quality management systems can serve as guidance.
Quality organization
Organizing for quality means to define responsibility and authority for activities that have any influence on quality. Factors such as products, nature of processes, customers, ownership, management philosophy, policy, etc. will influence the way the organization is structured.
Involvement and participation of everyone
Everyone in the organization influences quality in his or her day-to-day work. It is therefore important that everyone is given the conditions for performing their work in a good way. For many companies, focusing on quality involves a cultural change. To bring about this change is the goal of a massive training input (see Strategy 2). The new culture is characterized with confidence and delegation. Everyone is engaged in a continuous process of improvements.
Strategy 2: Massive training
Changing to a genuine focus on quality is usually a transformation that involves a radical re-adjustment of the company's internal culture. This means that everyone's attitudes will need to be changed. Moreover, new skills and knowledge will be required in many areas. Bringing about this change in attitudes and providing these skills is the purpose of a massive input in the training field.
Training in quality is provided for everyone within the organization, regardless of function and level. Training must start with top management and then work its way down the organization, level by level. The training generally has four components:
Top management seminars
Top management has a tremendous influence on quality. This has been said many times. Still, however, there is a lack of professional hands-on leadership in the field of quality. Without a sound knowledge of how to manage for quality, top managers are often just paying lip service to quality or they might go for what is at the moment highlighted in business magazines. This means that they apply trendy concepts and tools, without knowing if this is really what is needed in order to bring about much better results. Of course, there are exceptions. The purpose of top management seminars is to give clear understanding of the importance of quality for the result of the company and to show how top management can considerably improve efficiency and profitability by providing hands-on leadership in quality.
Workshops for managers
Work is carried out in processes. The processes must be capable and efficient. They have also to be managed in such a way that they will generate the intended results. In most cases, when it comes to major processes, more than one function is involved. This means that they are cross-functional in nature, and in order to achieve success in quality, it is essential to consider cross-functional issues. According to the author's experience, this is the objective of the second component of an in-house training program in total quality. This training is carried out as workshops for all personnel in managerial and other key positions.
Training of specialists
In addition to managers, there are also many specialists who need to be trained in quality. The aim of this training is to give these specialists knowledge and understanding of the factors that influence quality in their respective functions. After completing the training, the specialists will be able to introduce effective methods in their own area. The content of the training depends on the function (product development, production, purchasing, marketing, quality, etc.).
Training of all other personnel
All other personnel also have to be trained. This type of training is provided by trainers from the organization, as the trainers must have a sound knowledge of the organization, its activities and culture. The trainers must be able to answer very down-to-earth and practical questions raised by the participants. In order to facilitate such broadly-based training, the author has developed a training package called "Focus on Quality". This material has been adapted to the conditions and needs of various sectors. At present there are versions for manufacturing, service, health care and public services organizations.
Strategy 3: Market orientation
Successful companies have a pronounced market orientation that includes both focus on customers and customer needs, as well as studies of competitors. This is often referred to as market-driven quality and it includes:
Customer focus
Customers, both existing and potential, are identified and their needs are found out by means of market research. Not just stated and implied needs are considered, but also needs that are unknown to the customers are looked for. Satisfying such needs might even lead to customer delight. Customers are not forgotten once the goods or services have been delivered. The company takes initiatives to obtain information about what the customers think about the goods and services. Customer attitudes are investigated regularly. A clear focus on customers might lead to a high degree of customer loyalty.
Monitoring competition
The company studies competition on the market regularly and systematically. In this area, benchmarking could well be used.
Monitoring trends
There are trends on the market. It is important to keep a close watch on the market in order to identify changes quickly and make the necessary adjustments. This applies also to technological changes.
Product planning
When a new product is to be developed, many units and individuals in the company are involved. If the launching of the new product is to become successful, careful planning and follow-up are required for the whole of the business from the moment the idea arises until the time the product starts being used. The planning states what tasks are to be carried out. It also states who has the responsibility for each task.
Strategy 4: Program for quality improvements
A prerequisite for success in the face of stiff competition in the market is continuous work on quality improvements. This work takes two directions. One is towards being able to meet customer needs in a better way, partly by removing any defects and failures from the goods and services delivered, and partly by adding new features. The other is to improve all processes - product planning, product development, purchasing, manufacturing, marketing, distribution, invoicing, etc. These processes are often complex and interdepartmental which may lead to inefficiency, unnecessary costs, unclear responsibility, dissatisfied customers and, in the final analysis, even lost orders.
Quality problems could be of two types. One type is sporadic problems. They are usually dealt with by "fire fighting". The other, and more important to the financial result of the company, is chronic problems. These problems might even be hidden in the organization. Often, the causes of chronic problems are much harder to identify than the causes of sporadic problems. That is why people tend to accept chronic problems and regard them as normal part of life.
The elimination of chronic problems represents a genuine quality improvement. But this needs a different approach from dealing with sporadic problems. It needs changes in attitude, knowledge, habit, technique, equipment, etc. In this context we can talk about a quality breakthrough. A breakthrough of this type requires willingness to tackle quality problems systematically, and throughout the whole organization. The activities have to be initiated and driven by top management. All functions have to be involved.
Quality improvement work is often a process that begins with symptoms and continues via causes to measures and follow-up. This process is far simpler in the case of sporadic problems than it is for chronic ones.
Most sporadic problems can be dealt with by the personnel concerned and by their supervisors. Their tasks include taking suitable measures in the event of imperfections and problems. Sometimes the help of a specialist might be needed.
In the case of chronic problems the question of responsibility is not so obvious, and these problems are harder to deal with. They affect several areas in the organization and lead to measures in different areas. The symptoms may show in one area, the causes in another, and measures may have to be taken in a third. Quality improvements of this type therefore make greater demands for steering and co-ordination of the activities involved.
An effective program for improving quality has several components:
Improvement procedures
The improvement process includes several steps: collecting data and other information, selecting improvement projects, setting up project teams, analyzing symptoms and possible causes, deciding on cause, evaluating remedial measures, deciding on, implementing and following up measures. Procedures for these steps have to be put into effect.
Organizing for improvements
Effective quality improvement work has to be carried out in a project-by-project approach. Experience shows that in organizational terms it is advisable to divide the quality improvement work into a steering component, and an analytical and remedial component. The steering component includes: deciding priorities for quality improvement projects, initiating analyses and other investigations, setting up project teams, deciding to implement the measures proposed. The analytical and remedial component includes: carrying out analyses and other investigations, arriving at causes, proposing measures. The responsibility for the steering component must be with the executive group or part of the executive group forming a quality council. The analytical and remedial aspects of improvement activities should be delegated to a project team, one for each project. This team will be the owner of the improvement project. Once the improvement measure has been implemented the project team is dissolved.
Training in improvement work
The members of the project teams must have a competence in the application of quality improvement tools and measures. If skills and knowledge are lacking, relevant training has to be provided.
Quality data
Effective improvement work is based on facts about the situation of the company. Such facts could be in the form a data on deficiencies and failures, customer complaints, poor quality costs, etc.
Quality assessment
By assessing the current situation and performance, opportunities for improvements are found. An effective tool in the assessment is the criteria included in a quality awards scheme, e.g. the Malcolm Baldrige National Quality Award or the European Model for Business Excellence. Other means to get relevant information are quality auditing and benchmarking.
Many companies applying the improvement concept Six Sigma have reported astonishing results. The reason for success is that Six Sigma embraces the components as per above.
Strategic plan for business development
The four strategies as per above include many activities. These activities have to be integrated into a strategic plan for business development (see Figure 2) leading to an internal culture of business excellence characterized by:
- Customer focus
- Process orientation
- Participation and empowerment
- Continuous improvement
Figure 2. Strategic plan for business development.
In the strategic plan, a variety of concepts, views and methods (even trendy ones) must be combined in such a way that they improve the organization's competitive ability and generate excellent business results.
In the author's experience, an effective strategic plan for business development contains four components:
- Commitment of top management
- Cultural change
- Improvements
- Systematic approach
Commitment of top management
Without the clear and explicit commitment of the organization's top management there is no chance of achieving worthwhile results. The executive group must show by practical action that they are truly concerned with developing the business by focusing on total quality.
A plan for this type of business development should initially be aimed at creating such commitment. A good way of starting is to hold a one-day top management seminar. The purpose of this is to convince the executive group of the effect that a business development with a focus on total quality has in the form of better results. In addition, it should be made clear that it is the dedicated support of top management that will determine what results are achieved.
To obtain facts on which the design of the strategic plan can be based, the top management seminar should be followed by a quality culture assessment. An assessment carried out during a relatively limited period of time is usually enough to show where the weaknesses lie and thus where the opportunities for developing the business exist.
The result of the assessment could be presented to top management at a workshop. The aim of this workshop is to decide jointly what needs to be done to significantly improve the operational results. The strategic plan for the rest of the development work is drawn up here.
Management commitment also includes defining the organization's mission. This forms the basis of the work on vision and quality policy. Both the vision and the quality policy are to be communicated by management to everyone in the organization. Everyone should understand the meaning of this for his or her own work. In addition, management should be prepared to communicate to the personnel its overall concrete goals for the business. This includes quality goals.
Cultural change
The customers and their needs should govern all the activities within the organization. The underlying principle should be to satisfy the needs of both external and internal customers. For most organizations this will require a change in the internal culture.
The factor that determines how successful this type of change will be is the commitment of top managers and how they convey their intentions to the rest of the organization.
This requires a comprehensive training program. This starts with a seminar for top management (see above under commitment of top management) and then continues down through the organization, level by level. The training is aimed at influencing attitudes to a business development with the focus on total quality and at providing the necessary knowledge about methods and techniques. The massive work required in the training field is dealt with in more detail above under Strategy 2.
Improvements
The improvement activities have two aims. One is to meet the customers' needs in a better way, the other is to improve all the processes within the organization.
Experience shows that the best results in improvement work are achieved by implementing one concrete improvement project after another, which is the approach used in the Six Sigma programs. Improvements are dealt with under Strategy 4 (see above).
The choice of improvement project should be made on the basis of information. The information can be obtained in different ways:
Operational results
It is easy to obtain information, using a limited effort, on the operational results of any organization. This could be reflected in the occurrence of faults and failures, complaints, process outputs, etc.
Problem identification
People in the organization usually find it easy to identify problems that need to be solved. A systematic identification of problems can thus serve as a useful start to the improvement work.
Process analysis
Studying and analyzing the organization's processes can provide a valuable basis for the improvement activities.
Customer-focused operations analysis
By a structured analysis of customers and customer needs, improvement opportunities will be found. External customers, as well as internal customers have to be considered.
Quality assessment
An assessment of the activities, for instance, with the aid of the criteria in a quality award scheme, can indicate where improvements are possible.
Poor quality costs
Information on the costs of poor quality, i.e. the costs that could be avoided if all products and processes were perfect, is a good starting point for the improvement work. This type of information provides a common basis for deciding on the importance of alternative improvement projects.
Customer attitudes
The customers' attitudes to the company's products and behavior are a key factor determining how successful the organization will be. It is therefore important to measure these attitudes. The information thus obtained serves as an important start of the improvement work.
Personnel attitudes
The attitudes of personnel towards the company's activities are very important for the operational results. It is therefore important to obtain information on the attitudes of the personnel through surveys. The results of these surveys can also be used as a basis for the improvement activities.
Benchmarking
Benchmarking is a way of learning to become better by making comparisons with successful organizations. This could be a useful point for starting the improvement process.
Systematic approach
The work needs to be conducted in a systematic way in order to achieve excellent results. This is where an appropriate quality management system comes in. Such a system should show how the different operations, which are essential to quality, should be carried out. The standards included in ISO 9000 can provide some guidance. However, it is up to each individual organization to work out the best systematic methods for their own needs.
Paper to the Sarawak's 3rd International Quality Congress, Kuching, Malaysia, September 2004
Dr. Lennart Sandholm
Professor and President, Sandholm Associates AB, Djursholm, Sweden
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